SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended August 31, 1995 Commission file number 1-8527
A.G. EDWARDS, INC.
DELAWARE 43-1288229
State of Incorporation: I.R.S. Employer Identification No.
ONE NORTH JEFFERSON AVENUE
ST. LOUIS, MISSOURI 63103
Registrant's telephone number, including area code: (314) 289-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or of such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At October 1, 1995, there were 62,412,210 shares of A.G. Edwards, Inc. common
stock, par value $1, issued and outstanding.
A.G. EDWARDS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Consolidated balance sheets
Consolidated statements of earnings
Consolidated statements of
stockholders' equity
Consolidated statements of cash flows
Notes to consolidated financial statements
Management's financial discussion
PART II. OTHER INFORMATION
SIGNATURES
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
August 31, February 28,
1995 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 39,472 $ 41,464
Cash and government securities,
at market, segregated under federal
and other regulations 50,383 43,808
Securities purchased under agreements
to resell 113,645 42,819
Receivable from brokers and dealers 590,706 309,417
Receivable from customers, less allowance
for doubtful accounts of $3,435
and $3,450 1,371,203 1,359,172
Securities inventory, at market:
State and municipal 96,832 77,834
Government and agencies 28,549 30,239
Corporate 25,193 44,489
Property and equipment, at cost, net of
accumulated depreciation and
amortization of $158,432 and $145,072 182,781 167,570
Other assets 118,642 107,470
$2,617,406 $2,224,282
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks payable $ 126,760 $ 106,973
Payable to brokers and dealers 679,667 462,693
Payable to customers 520,880 415,741
Securities sold but not yet purchased,
at market 21,097 39,478
Employee compensation and related taxes 244,518 246,120
Income taxes 5,644 2,370
Other liabilities 34,105 31,626
Total Liabilities 1,632,671 1,305,001
Stockholders' Equity:
Preferred stock, $25 par value:
Authorized 4,000,000 shares, none
issued
Common stock, $1 par value:
Authorized 250,000,000 shares
Issued 62,401,946 and 62,294,211
shares 62,402 62,294
Additional paid-in capital 196,993 194,863
Retained earnings 727,162 665,992
986,557 923,149
Less: Unamortized expense of
restricted stock awards 1,822 3,868
Total Stockholders' Equity 984,735 919,281
$2,617,406 $2,224,282
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended August 31, Ended August 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES:
Commissions $217,827 $155,225 $399,136 $330,363
Principal transactions 56,086 57,937 112,961 114,843
Investment banking 22,138 31,252 47,464 52,511
Interest 32,811 25,328 65,377 47,067
Other 33,185 25,776 62,411 52,310
362,047 295,518 687,349 597,094
EXPENSES:
Compensation and benefits 233,479 190,035 440,874 388,252
Communications 19,480 17,798 39,321 36,510
Occupancy and equipment 19,656 18,416 38,177 35,639
Floor brokerage and clearance 4,396 3,323 8,166 7,164
Interest 495 2,185 1,904 3,161
Other operating expenses 14,506 12,565 31,659 25,738
292,012 244,322 560,101 496,464
EARNINGS BEFORE INCOME TAXES 70,035 51,196 127,248 100,630
INCOME TAXES 26,770 19,601 48,610 38,481
NET EARNINGS $ 43,265 $ 31,595 $ 78,638 $ 62,149
Earnings per share $.67 $.51 $1.23 $1.01
Dividends per share $.14 $.14 $.28 $.28
Average common and common
equivalent shares outstanding 63,962 61,484 63,803 61,471
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 1994 AND 1995
(In thousands, except per share amounts)
(Unaudited)
Unamortized
Additional Expense of
Common Paid-in Retained Restricted Treasury
Stock Capital Earnings Stock Awards Stock
<S> <C> <C> <C> <C> <C>
BALANCES, March 1, 1994 $60,446 $165,124 $576,073 $(11,276) $ 0
Net earnings 62,149
Cash dividends -
$.28 per share (16,912)
Treasury stock acquired (2,766)
Stock issued:
Employee stock
purchase/option plans 101 1,285 815
Restricted stock (3) 773 305 (441)
Amortization of restricted
stock awards 3,540
BALANCES, August 31, 1994 $60,544 $167,182 $621,310 $(7,431) $(2,392)
BALANCES, March 1, 1995 $62,294 $194,863 $665,992 $(3,868) $ 0
Net earnings 78,638
Cash dividends -
$.28 per share (17,468)
Stock issued:
Employee stock
purchase/option plans 108 1,861 221
Restricted stock 269 64 (221)
Amortization of restricted
stock awards 1,982
BALANCES, August 31, 1995 $62,402 $196,993 $727,162 $(1,822) $ 0
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
A.G. EDWARDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended August 31,
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 78,638 $ 62,149
Noncash items included in earnings 21,541 22,161
(Increase) decrease in segregated cash
and government securities (6,575) 148,121
Increase in net receivable from brokers
and dealers (64,315) (207,629)
Decrease (increase) in net receivable
from customers 93,108 (140,122)
(Increase) decrease in net securities inventory (16,393) 34,666
Net change in other assets and liabilities 8,140 (95,967)
Net cash provided by (used in) operating activities 114,144 (176,621)
Cash Flows from (payments for) Investing Activities:
Securities purchased under agreements to resell (70,826) 101,440
Capital expenditures and other investments (30,144) (36,683)
Net cash (used in) provided by investing activities (100,970) 64,757
Cash Flows from (payments for) Financing Activities:
Bank loans 123,800
Employee stock transactions 2,302 2,835
Cash dividends (17,468) (16,912)
Treasury stock (2,766)
Net cash (used in) provided by financing activities (15,166) 106,957
Net Decrease in Cash and Cash Equivalents (1,992) (4,907)
Cash and Cash Equivalents at March 1 41,464 40,341
Cash and Cash Equivalents at August 31 $ 39,472 $ 35,434
<FN>
Income tax payments totaled $42,227 and $45,750 during the six month periods
ended August 31, 1995, and 1994, respectively.
Interest payments totaled $1,773 and $2,420 during the six month periods ended
August 31, 1995, and 1994, respectively.
See Notes to Consolidated Financial Statements.
</TABLE>
A.G. EDWARDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 1995
(Unaudited)
FINANCIAL STATEMENTS:
The consolidated financial statements include the accounts of A.G. Edwards, Inc.
and its wholly owned subsidiaries (collectively referred to as the "Company"),
including its principal subsidiary, A.G. Edwards & Sons, Inc. ("Edwards"), and
have been prepared in conformity with generally accepted accounting principles.
These financial statements should be read in conjunction with the Company's
annual report for the year ended February 28, 1995. All adjustments that, in
the opinion of management, are necessary for a fair presentation of the results
of operations for the interim periods have been reflected. All such adjustments
consist of normal recurring accruals unless otherwise disclosed in these interim
financial statements. The results of operations for the six months ended August
31, 1995, are not necessarily indicative of the results for the year ending
February 29, 1996.
NET CAPITAL REQUIREMENTS:
Edwards is subject to the uniform net capital rule administered by the
Securities and Exchange Commission ("SEC"). This rule requires Edwards to
maintain a minimum net capital, as defined, and to notify, and sometimes obtain
approval of, the SEC and other regulatory organizations for substantial
withdrawals of capital and loans to affiliates. At August 31, 1995, Edwards'
net capital of $649,124,000 was $623,111,000 in excess of the minimum required.
A.G. EDWARDS, INC. AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION
SIX MONTHS ENDED AUGUST 31, 1995 COMPARED TO
SIX MONTHS ENDED AUGUST 31, 1994
Results of Operations
The six months ended August 31, 1995 saw an upturn of retail investor activity
compared to the level experienced during our last fiscal year. The NYSE and
Nasdaq overall trading volumes increased 24% and 37%, respectively, over the
prior year, which resulted in an 19% increase in total customer trades. The
number and size of customer trades and the product mix generally affect the
level of revenues. The number of branches and brokers increased to 526 and
5,620, which represent increases of 4% and 6%, respectively, compared to the
same period last year.
Total revenues increased $90 million (15%) from last year, from $597 million to
$687 million. Expenses were $560 million, an increase of $64 million (13%),
resulting in a rise in net profit margins from 10.4% last year to 11.4% this
year.
Total commission revenue increased $69 million (21%) primarily due to increases
in listed and OTC revenue. The combination of listed and OTC revenue increased
$66 million reflecting the recent rise in volume in the equity markets,
contrasted with the uncertainty last year caused by rising interest rates.
Revenues from principal transactions were flat. An increase in corporate equity
revenue of $10 million (51%) was offset by a decline in revenue generated from
sales of all debt products, which are down $12 million (12%). Market conditions
for equity securities improved this year compared to last year. Customer demand
for debt securities has declined primarily due to uncertainties in the bond
market contrasted with a rising interest rate environment last year. As a
result, revenues from bond sales have fallen $13 million. As a partial offset,
bond inventory gains increased $1 million, due to lower gains last year from
rising interest rates.
Investment banking revenue decreased $5 million (10%) principally due to
decreases in corporate equity and management fee revenues partially offset by an
increase in corporate debt revenue. Revenue from corporate equity issues and
management fees have declined due to the participation in several large deals
last fiscal year. The initial public offering market continued to be slow early
this year due to the poor performance of the equity markets last year. Revenues
from corporate debt issues rose $3 million due to increased activity in the new
issue market for corporate debt securities and a rise in sales of certificates
of deposits.
Interest revenues increased $18 million (39%) primarily due to higher interest
rates earned on customer receivables, debt inventory, and short-term
investments. Higher levels of debt inventory and short-term investments also
contributed to this increase.
Other revenues increased $10 million (19%) resulting from an increase in
customer investments under professional management. Revenue from service fees
have also increased due to a rise in custodial and administrative transaction
fees.
Compensation and benefits expense increased $53 million (14%) due to increases
in most categories. Commission expense increased due to the rise in
commissionable revenue. General and administrative salaries and related
benefits increased due primarily to general increases and expansion. Incentive
related compensation rose as a result of higher earnings.
Liquidity and Capital Resources
No material changes have taken place since February 28, 1995 regarding the
Company's liquidity, capital resources and overall financial condition.
THREE MONTHS ENDED AUGUST 31, 1995 COMPARED TO
THREE MONTHS ENDED AUGUST 31, 1994
Net earnings for the quarter ended August 31, 1995 were $43 million on revenues
of $362 million compared to net earnings of $32 million on revenues of $296
million for the same period a year ago. The explanation of revenue and expense
fluctuations presented for the six month period are generally applicable to the
three months of operations.
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
There have been no material changes in the legal proceedings previously
reported in the Company's Annual Report on Form 10-K for the year ended
February 28, 1995.
Item 4:Submission of Matters to a Vote of Security Holders
(c) The results of the annual meeting of stockholders, held on June 22,
1995, were previously reported on Form 10-Q filed for the quarter
ended May 31, 1995.
Item 6: Exhibits and Reports on 8-K
Exhibit 27 Financial Data Schedule. (This financial data schedule
is only required to be submitted with the Company's Quarterly
Report in Form 10-Q as filed electronically to the SEC's EDGAR
database.)
Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended August 31,
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
A.G. EDWARDS, INC.
(Registrant)
Date: October 13, 1995 /s/ Benjamin F. Edwards III
BENJAMIN F. EDWARDS III
Principal Executive Officer
Date: October 13, 1995 /s/ David W. Mesker
DAVID W. MESKER
Principal Financial Officer
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<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE
SIX MONTH PERIOD ENDED AUGUST 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> AUG-31-1995
<CASH> 39,472
<RECEIVABLES> 1,390,592
<SECURITIES-RESALE> 113,645
<SECURITIES-BORROWED> 571,317
<INSTRUMENTS-OWNED> 150,574
<PP&E> 182,781
<TOTAL-ASSETS> 2,617,406
<SHORT-TERM> 0
<PAYABLES> 957,982
<REPOS-SOLD> 0
<SECURITIES-LOANED> 613,843
<INSTRUMENTS-SOLD> 21,097
<LONG-TERM> 0
<COMMON> 62,402
0
0
<OTHER-SE> 922,333
<TOTAL-LIABILITY-AND-EQUITY> 2,617,406
<TRADING-REVENUE> 112,961
<INTEREST-DIVIDENDS> 65,377
<COMMISSIONS> 366,902
<INVESTMENT-BANKING-REVENUES> 47,464
<FEE-REVENUE> 68,861
<INTEREST-EXPENSE> 1,904
<COMPENSATION> 440,874
<INCOME-PRETAX> 127,248
<INCOME-PRE-EXTRAORDINARY> 127,248
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,638
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
